Verizon has triumphed over Qwest in the battle for long-distance carrier MCI. …

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MCI's board of directors has accepted a takeover offer from Verizon, leaving Qwest Communications, the other suitor for MCI, in the lurch. Both companies has been pursuing MCI for the last two months, but Verizon recently upped the ante with more up-front cash, and an agreement to protect MCI stockholders from any stock loss that might occur in the near future. Verizon's bid puts MCI's value at US$7.6 billion, which is still lower than the US$8.45 billion offered by Qwest. Why not go with the highest bidder? MCI has expressed concerns over Qwest's financial strength, including the fact that it would need to finance the takeover. Some have likened a potential Qwest-MCI merger to the ill-fated AOL-Time Warner merger, or even MCI's own error in judgment in merging with WorldCom.

"MCI's Board has been closely and carefully evaluating all of the recent developments," said Nicholas deB. Katzenbach, MCI Chairman of the Board. "We believe Verizon's substantial increase in its offer, the strength of its competitive position and the financial certainty at close make this offer compelling to our shareholders, customers and employees."

MCI is the US's second largest long distance carrier, but the company is still recovering from the WorldCom bankruptcy and fraud scandal. Their customer base, however, is huge, and will extend the reach of whichever bidder ultimately satisfies the stockholders. Originally, MCI had entered into an agreement with Verizon back in February, but when Qwest came along offering significantly more money, the playing field opened back up (with Verizon's consent). Verizon's original offer put MCI's value at US$6.8 billion, but Qwest's original $8 billion offer forced Verizon to sweeten the deal.

It's quite possible that both companies' offers are overestimating the value of the company, but all signs point to a future where revenues from long distance shrink and thin margins require huge customer bases. And when SBC managed to acquire AT&T earlier this year, a large elephant suddenly appeared in the room. Presuming this deal goes through, we'll see SBC (+AT&T) and Verizon (+MCI) sitting atop the American market.

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Ken Fisher
Ken is the founder & Editor-in-Chief of Ars Technica. A veteran of the IT industry and a scholar of antiquity, Ken studies the emergence of intellectual property regimes and their effects on culture and innovation. Emailken@arstechnica.com//Twitter@kenfisher